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Imported Foods on Modern Retail Shelves

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Wine corked at Nasik valley is still not able to fetch the premium which the sparkling bottles of red wine from Italy or France are getting on modern retail shelves. The imported tag automatically adds the exceptional sense to the wine cruet. The same mechanism is followed in many other food product categories, like cheese, fruits and vegetables, meat products, creams, etc.

In most of the Indian urban cities, from small grocery stores to lavish hypermarkets, everyone is involved in pushing imported food products. Since the margin for imported foods is better, so is the acceptance; Washington apples, Australian kiwifruit, Swiss chocolates, French cheese, Italian wine and pastas, are no more a niche for the metro Indian shopper. In comparison to local products, imported goods are heavy on the Indian wallet as the aligned taxes and duties are pushed towards customers. Still the ‘Made in Foreign’ tag is penetrating fast into the Indian shopping basket. The rising aspiration of urban Indians has paved the way to adopt the tastes from all over the world into their kitchen. Increasing globalisation, urbanisation, rising income, growth of organised retail, changing lifestyles and food habits have welcomed many sophisticated food manufacturers across the globe.

However, the grass is not green all the way – heavy import duties and lack of infrastructural support still restrict entry of many international players on the Indian terrain.

Imported products have witnessed a higher acceptance in urban Indian pockets. The experimenting nature of the shopper is encouragement for the importers and the formats offering imported and gourmet foods. By dissecting the imported food and wine segment of India, it can be clearly said that dairy is the future, followed by wines and packaged foods.

The imported dairy market is led by products from New Zealand and Australia in India. Other emerging destinations for dairy imports are Denmark, France and China.

The second fastest growing import category in India is the wine sector. Australian wine is the new favourite among Indians. The third category that is growing at a fast pace is packaged food. Sauces, pastas, chocolates and cocoa products are the major drivers of imported packaged food segment. Singapore, Malaysia, the Netherlands and Italy are the major destinations for chocolates and cocoa preparation in India.

Fruit, vegetables and nuts are the major contributors to the imported food basket of India.

Many international manufacturers are still trying to figure out the Indian market and the association with importers to introduce their product portfolio. However, the success rate is not very impressive. Many expansion and entry plans are still on hold from various companies abroad because of several constraints and chaos associated with the Indian market. Some of the key challenges faced by these international giants are as follows:

High import duties and aligned tariffs: A high import duty on majority of food items along with the non-tariff barrier continues to create an obstruction for importers and manufacturers. The added cost gets transferred to the consumer and hinders the adoption of imported food. Regular interventions and recommendations are made towards lowering the duties by different importers associations and trade commissions. However, the Indian government has intervened by amending the duty structure of various food items from time to time, depending upon market conditions and requirements.

Lack of infrastructure support: Poor infrastructure support in terms of transport and storage facility acts as one of the major laggards for imported food segment, and is resulting in high lead time. The integrated cold chain framework is still at a nascent stage in India, and the huge demand and supply gap of support infrastructure acts as a constraint in the supply chain of imported goods.

Supply chain constraints: Supply chain constraints are blocking the reach beyond metros and mini metros. Majority of India lives in rural and semi-urban areas; the supply chain constraints coupled with poor infrastructure support makes it impossible to reach such markets.

Stringent laws for food: For international manufacturers, India is a land of stringent food laws which makes it very difficult to enter and sustain in the Indian market. Various ministries abide by various rules and regulations to ensure entry and availability of safe products for the consumers. Exporters have to follow an array of food laws covering use of additives and colours, labelling requirements, packaging, weights and measures, shelf-life and phyto-sanitary regulations.

Diverse food habits across the nation: Food is like a religion in India; the different cultures make it a home for an array of cuisines. The nation is known for diversified and distinct food habits throughout the globe. Customising the product offering according to the Indian platter has gained popularity in recent times, but the same is limited to food services. Catering to the diversified food habits and fulfilling the expectations in terms of quality and affordability will remain a laggard for the imported food segment in India.

Preference for fresh and traditional foods: ‘Fresh is better’ serves as a cacophony for food processors in India. Apart from such misconceptions, the Indian consumer is also still very much aligned with traditional food, depending on region and culture. The awareness level and adoption of processed and packaged food as safe choices are picking up in India, but still serve as a challenge.

Affordability vs Availability (of similar or better products at competitive prices): India serves as the food basket of the world; it leads the production charts in the perishables and grains category. Indian manufacturers are much aligned with the consumer’s need, as the offerings are more cost competitive than imported products. Availability of similar or better quality products continues to serve as a challenge for imported goods in India. On the other hand, better quality imported produce also sets a benchmark for Indian manufacturers to raise the quality level matching the cost effectiveness.

Sourcing: Sourcing also comes as a major constraint in front of retailers and manufacturers. The direct sourcing module is still nurturing in India. Only a few formats like adopt partial direct sourcing from manufacturers around the globe (Thailand, Spain, Italy, etc). The direct sourcing approach has only worked for the large retailers, with either hyperformats or gourmet selections. Apart from these high-end retailers (Gourmet/Hyper), all other retailers depend on the distributor cum importers mode for sourcing of imported food and wines. This helps retailers in overlooking the import structure, associated paper work and regulatory licensed procedures. The cost incurred in maintaining the importer/distributor mode can be easily charged to the end consumer, as imported food anyway carries a pre-conceived notion of ‘Premium’ attached to it.

If all the above challenges can be addressed, then the sky is the limit for imported food and wines in India. The key opportunity areas in the future will revolve around direct sourcing, planting local bases, price betterment, introducing new products, and reaching the untapped markets. Apart from these vast opportunities ‘affordable premium’ will be the next big opening.